Sars commissioner Edward Kieswetter. Picture: Moneyweb
With about 38 400 individuals with a net asset value of over one million US dollars (about R14.7-million) as well as their complex tax structure, experts believe the establishment of a dedicated unit within SA Revenue Services (Sars) for this class of taxpayer was long overdue.
Finance Minister Tito Mboweni announced the establishment of such a unit on Wednesday, during his budget speech.
“For Sars to continue to provide a customised and seamless service to various categories of taxpayers, we are establishing a separate unit to focus on individual taxpayers with wealth and complex financial arrangements,” the revenue service announced in a statement shortly afterward.
The unit, which will be known as High Wealth Individual Taxpayer Segment (HWI) will initially be located with the Large Business & International Taxpayer Segment (LB&I). It will focus on high wealth individual taxpayers with complex financial arrangements.
Also Read: Budget 2021: Tax man targets the rich with new Sars unit
Tax attorney at Tax Consulting SA Jean-Louis Nel said in 2017 when Sars started investigating these high net wealth individuals, the taxpayer was able to recover an additional R184-million.
“So it completely makes sense for Sars to take this step. The definition of high net wealth, according to the wealth report, is that you have asset a turnover of more than one million dollars, but Sars has expanded the definition to include individuals who earn over R3-million.
“So irrespective of whether you earn less than one million dollars, you might be on Sars’ radar,” he said.
According to Nel South Africa, being the largest wealth market in Africa and ranked 32nd largest in the world, it would make sense that Sars would start scrutinising high net worth individuals, because they often have very complex tax structures.
He said they also had interests in various foreign markets and considering South Africa’s membership of the G20 list of countries, the country is obligated, to share information with other tax jurisdictions.
Nel said the unit will be crucial in compiling reports before a taxpayer is audited, and working with specialised auditors who deal with this type of tax will assist with effective collection.
“When a high-net individual files their tax return they declare 70% of their income and the other 30% is in another country and is not declared. Now Sars will only get notice of this once they do an audit.
“By proceeding beforehand they can say ‘we know you have this in country X and they file their report. They will be able to see that country X is not in the returns and they can raise this immediately, and the process is carried forward,” he said.
South African Revenue Service (Sars) Commissioner, Edward Kieswetter, during a press briefing held at Sars offices in Pretoria, 12 November 2019. Picture: Jacques Nelles
Sars commissioner Edward Kieswetter said they believed statements of assets and liabilities often say more about the financial affairs of a person than statements of income.
Also Read: Sars commissioner Kieswetter elected to African tax body
He said they have been paying particular attention to taxpayers with undeclared offshore holdings, to optimise compliance.
Kieswetter said they have at their disposal information relating to offshore account holdings of South African taxpayers, some which seems not to have been declared.
“The information that has come into our possession shows possible non-compliance by a number of these taxpayers,” he said.
On Wednesday the Hawks in East London arrested alleged tax evader Neliswa Tantsi (49), who allegedly defrauded Sars.
Between 2014 and 2015, Tantsi allegedly failed to declare her trading earnings to Sars and is alleged to have made a misrepresentation and under-declared her profits, but still claimed inflated Value Added Tax (VAT). This resulted in the taxman losing approximately R1.5 million.
Former Sars official Johann van Loggerenberg is seen in the Pretoria Magistrate’s Court, 9 April 2018. Picture: Jacques Nelles
Former Sars executive and author of Rogue (2016), Death and Taxes (2017) and Tobacco Wars (2019) Johann van Loggerenberg said he welcomed the “re-establishment” of this capacity, saying it demonstrated forward thinking.
“These are things that exist in revenue services the world over. These capabilities are necessary. History has shown us we need it.
“There is money in the tax base that is not coming in because the revenue service has lost that capability. Base erosion and profit shifting investigations and audits are highly complex. They take a long time and they are difficult to do,” he said.
He said it also took time to build such capacity and that it will take years before any results could be seen.
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